I encountered the same problem.  Here are some additional details and a
workaround.

This is a fresh 12.04 install, with updates but no new software or
options added yet except for the nVidia proprietary drivers ("Updated",
not "Current").  My video resolution is 1600x900 on my laptop and
1920x1200 on my external monitor.  I'm using nVidia TwinView to enable
the external monitor.  Note that the SystemSettings >> Displays
application presents my display as a single monitor with "Resolution:
3520 x 1200".

I chose "Launcher placement: Laptop" and "Sticky edges: OFF".

I got this error dialog:

The selected configuration for displays could not be applied
required virtual size does not fit available size: requested=(3520, 1200), 
minimum=(320, 175), maximum=(1600, 900)

30 seconds later I got this error dialog (different from the OP):

Failed to apply configuration: %s
Timeout was reached

Note: During the time I was waiting for this timeout dialog, the "Does
the display look OK?" dialog did NOT appear on any monitor.

I was able to work around the problem by using this procedure:

1. Disable the 2nd monitor in nvidia-settings application.
2. System Settings >> Displays, make changes, apply. 
3. Click "Keep this configuration" on the "Does the display look OK?" dialog.
4. Enable the 2nd monitor in nvidia-settings application.

After this procedure, when I opened the Displays applet and clicked
Apply, I received the same error dialog as before. This time I clicked
"Close" on that error dialog and I received the same error dialog the OP
had:

Failed to apply configuration: %s
GDBus.Error:org.gtk.GDBus.UnmappedGError.Quark._gnome_2drr_2derror_2dquark.Code3:
 required virtual size does not fit available size: requested=(3520, 1200), 
minimum=(320, 175), maximum=(1600, 900)

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https://bugs.launchpad.net/bugs/965455

Title:
  Changing launcher location on dual monitors results in error dialog.

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